Smyrna times., 1887-01-12
The Future of the National Bank
ing System.


Bills are now under consideration in
Congress for the purpose of authorizing
the organization of national banks upon
The deposit of One-half of the United
states bonds now required by law. and
II is believed by Mr.. Knox that this
measure will pass during the present
session of Congress. This bill will not
only give the new banks an opportunity
to organise without investing so largely
IN United States bonds, which bear a
high premium, but will give the banks
now IN operation an opportunity to
retire a portion of their bonds. if thew
do not desire circulation.
Since Congress met the Morrison
Tariff Bill has been defeated. and there,
IS but little prospect that any bill will
pass, during the present session. that
will diminish the duties on imnorts
Ihe surplus in the Treasury is increas-
ing, and it is of the greatest Importance
that some measure should pass before
congress adjourns which shall release
from the Treasury the accumulations
of the current year.
Mr.. Hewitt has introduced hill
authorizing the anticipation of the nav
ment OF interest upon the 4 per cent
bonds which mature in 1907, bv reduc.
ing the interest to a lesser rate. This
proposition is similar to one recon-
mended by Comptroller Knox in his
report for 1882 1t is also similar to q
Dill introduced by Senator Aldricb. Of
Rhode Island, in the Senate in the wear
1888, which measure has again been
introduced by him in the Senate within
the last few days. Mr.. Hewitt. how
ever proposes, instead of issuing new
bonds, to stamp the new 4 per cent
bonds which are presented, so as to
show the reduced rate of interest He
also authorizes such stamped bonds 10
De received as security for the issue of
circulating notes to the national hanks
at the par value thereof. The necessitv
for the passage of some such bill. which
Shall relieve the Treasury of its sur
plus, is much more urgent at the present
time than when the proposition was
previously presented.
II the necessary legislation sbould
pass and the interest upon the 4 nor
cent. bonds be reduced to 23 per cent
1t would require considerably more
than SlOO,O00,OOO to pay the difference
In the interest, and that amount of the
treasury surplus would therefore he
released from time to time. as the
bonds are presented for exchange
Some doubt has been expressed whether
the per cent. bonds would be nre-
sented if such a bill should be passed
In answer to this question ex-Comp-
troller Knox says in the North Amer
ican Reuiew:
. 1t is believed that, ifthe bill should mass |
authorizing the refunding of the Is into |
24s, the former would be presented to tbo |
Treasury for that purpose United States |
oOhds are held for II specific purpose Ma |
tlOnal banks hold them as security for cir
culatlng notes or for Government denosits
Savings banks and trust companies hold |
them as reserve; and insurance comma |
mes ana other corporations are required nv |
law 10 deposit them with the State author |
lues' n bond of the United States bearing |
less rate OF interest could be used eouaIl9 |
well for all these purposes.
II private individuals are the owners. il |
Is because United States bonds are exemnt
from taxation, and afford to them, as thew |
believe, the safest form of investment.
according to report of the Actuarv of |
the treasury Department, an investment in
tue As IN the month of November last
realized to investors an average rate of
interest of 2.32 per cent. only. TRe holders
OF the Is, Dy converting them into the new (.
bonds, could still possess every advantage
they now enjoy, and would realize a slightly |
increased rate of interest; while a large
amount Of principal now invested in nre.
mum, which Is unremunerative in the
aggregate more than SlO0OO0, coo. would he
replaced IN the hands of the holders Of the
Is for Investment in United States bonds
or any other funds yielding still greater
The value Of the new AIS could be in
creased, and the inducement to the holder
to make the exchange also increased, bv
providing that the circulation to be issued
upon the new bonds when deposited bv the
national banks as security therefor, shall
not be subject to the present tax of per
cent. per annum, or, iftaxed not exceeding
Z OF per cent. making the bonds more
desirable as a basis for circulation than
either the 4s or the AIS, which will soon be
the only bonds outstanding
1t would seem to be plain that if the
necessary legislation is not obtainable from
Congress for authorizing this conversion. it
Is not because the financial policy and the
necessity for such legislation are not ap-
parent.
- " If the rate were reduced to q per cent.
all the public debt of the United States
would then, four years hence in 1891, be at
lower rate of interest than that of any
other government.
The Government will undoubtedly de-
cline to purchase the As for its sinking fund
It the present high rate of premium, but if
t should authorize the payment of its in
crest in advance, and reduce this debt from
ne present rate to q per cent, it could
hen, subsequently,, if thought advisable,
after the AIS are paid, in the year 1891, pur-
chase the new q per cent. bonds then out
standing, which would be redeemable in
he year 1907. Tile independent